Anyone currently doing Rental Arbitrage in SoCal (OC/LA)?

Question

Anyone doing rental arbitrage using the extended stay/corporate housing models in the OC/LA area? Have you experienced particular law restrictions in your respective cities prohibiting shorter term rentals via subleasing properties you are renting long term?

Michael Baum · Answer

Hey @Elizabeth Njuguna, I think you will find that many arbitrage people have lost their collective shirts in the last 4 months. We haven't had a question about arbitrage in quite a while and I am pretty sure it is due to that.

Personally, I think it is a terrible idea. You are on the hook for the lease, sometimes for more than market rates in order to keep the owner happy. The COVID19 pandemic has show it's major weakness. If the market drops, you are still on the hook. When you own, at least you can convert to LTR in a pinch.

I highly recommend you look to purchase your first property and start there. Take a look around the forum and search for arbitrage, there is a ton of information.

And welcome to the forum!

Luke Carl · Answer

@Elizabeth Njuguna

WHY do we not have a regular poster that does arbitrage? We need someone to handle all of these questions!

Sorry Elizabeth the folks that hang out here regularly -own their properties and they’re not in big cities.

Someone will come along with some advice at some point!

Adam Tafel · Answer

I have 4 leases at this point, fully booked through the summer. Ask me anything -

John Cornelius · Answer

@Elizabeth Njuguna

Hey Elizabeth, I just moved out of LA back to my native Florida. The issue with LA/OC is the ratio of the rents you can charge relative to the value/mortgage of the property..

For instance I have a $240K property in the south east that's consistently rented for $250 a night. (I'm sure people on this forum have more lucrative numbers)

In LA I've seen million dollar homes go for $149 a night, which won't even cover the mortgage, taxes, insurance etc.. of the subject property.

Cavan Mitchell · Answer

@john cornelius. Which area goes for $250/night. Thats pretty good numbers. We have property in Tennessee for $240K but adr is $115

My Vegas property is $460K and I get about $230/night.

John Underwood · Answer

I think many of the arbitrage people have found out that arbritrage was a bad idea during the virus and broke their contracts to get out.

This is not real estate investing. It is just a job.

Paul Sandhu · Answer

Extended stay/corporate housing is a myth.  What it is implying is that the executive is too stupid to find a place to stay by his own efforts.  He needs someone else to do it for them.

In real life the person is given a per diem.  They find accomodations that suits their own needs.

Source: Me, I've rented to 1700+ contractors with a per diem.

Anyone currently doing Rental Arbitrage in SoCal (OC/LA)?

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